David Zeiler:U.S. Federal Reserve policies like QE3 are building up to an inflationary catastrophe, says economic expert Peter Schiff.

Schiff, the CEO and Chief Global Strategist of Euro Pacific Capital, made his remarks about the dire consequences of excessive quantitative easing in a video interview on Yahoo! Finance’s Breakout.

Schiff said he has dubbed the Fed’s third round of bond-buying, known as QE3, “Operation Screw” because “everybody’s pretty much screwed if they own dollars.”

He warned that the Fed can only continue its policies of buying U.S. Treasuries and mortgages by printing more money, and printing more money inevitably will drive much higher inflation.

“The Fed is now promising to print $85 billion a month,” Schiff said. “That’s over a trillion dollars a year. And I think that’s just their opening bid.”

QE3 Not “Inflation-Neutral’

Schiff, who is best known for predicting the collapse of the housing bubble and the 2008 financial crisis in his 2007 book “Crash Proof,” laughed at the claim made by Fed Chairman Ben Bernanke that QE3 is “inflation-neutral.”

Inflation isn’t running rampant now, he said, only because all that new Fed money hasn’t worked its way to the consumer yet.

“Inflation enters the market in different ways,” Schiff explained. “It goes through the banks, it goes through housing, it goes through stocks. Sometimes it takes a distorted path before it ultimately ends up in consumer prices.”

As proof that a major bout of inflation is lurking around the corner, he noted that gold prices have more than doubled since the Federal Reserve launched QE1, QE2 and now QE3. Rising gold prices indicate a weakening dollar.

“Ultimately, I think we’re going to see prices skyrocketing,” he said. “And I think we’re going to get shortages.”

Schiff said the long gasoline lines in New York and New Jersey in the aftermath of Hurricane Sandy are a taste of what’s in store for the broader U.S. economy when inflation takes off.

“They won’t let gas stations raise prices because they’ll prosecute them for price gouging,” he said. “So as a result, people have to wait in line five hours for gas.

“When prices start to skyrocket as a result of the inflation the Fed’s creating, you’re going to see price controls imposed on a whole bunch of products,” Schiff said, “which means we’re going to be standing in line for just about everything.”

The last time the U.S. government imposed price controls to combat inflation was during the administration of President Richard Nixon in 1971.

The effort failed spectacularly, leading to product shortages and only temporarily suppressing price increases, which resumed with a vengeance after the controls were lifted.

Whether U.S. President Barack Obama heeds this lesson from history or elects to use the discredited tool of price controls to assuage a citizenry irate over high inflation remains to be seen.

But in any event, Peter Schiff thinks the Fed’s QE3 already has guaranteed a big jolt of inflation.

“It’s only a matter of time before you see the increase in consumer prices,” Schiff said. “It’s like you’re standing on a train track and you can see a light, and you can hear a whistle. Get off the track because the train is coming. Don’t stand there until you get hit by it.”

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